Govt Likely To Roll Out Spectrum Trading In A Year: MF Farooqui

NEW DELHI: The government is set to allow a stressed telecom sector to both share and trade in airwaves before the next round of auctions to be held by March 2015, key moves which will provide options for players to monetise assets and ease pressure on operators struggling with congested networks.

“I think it can all come together (spectrum sharing and trading norms). We had done some work on sharing, but there is an element on it which is linked with SUC (spectrum user charges) and… that was to undergo a change and we didn’t know what decision will get taken there, because that had to go at various levels,” telecom secretary MF Farooqui told ET. He added that the sector regulator had already given its recommendations on spectrum trading and that the telecom department (DoT) was finalising these.

The department though is yet to send a reference to the Telecom Regulatory Authority of India requesting its recommendations on sharing, but like trading, the regulator can act suo moto, without waiting for DoT’s request.

According to a draft of the sharing rules being drawn up by the DoT, the government was considering allowing telecom companies to share 2G spectrum with each other as long as their combined holding is not more than 50% of the total airwaves allotted in that region.

Spectrum sharing would also be allowed only between two telcos holding 2G spectrum in the same service area, but not between operators holding airwaves in two separate circles. Bandwidth sharing is also not allowed between operators holding 3G airwaves and operators won’t be allowed to lease their spectrum only share it. Clarity on spectrum trading and sharing should come before the next auction which “will happen in a year’s time from now”, Farooqui said. “We will have to take a call whether 800 MHz and the next set of auctions can be actually taken together and can be done a bit earlier.” He was speaking nearly a week after the close of a successful bandwidth auction that raised more than Rs. 61,000 crore for the government and a day after new mergers & acquisitions rules were announced.

Combined with the new M&A rules, the guidelines on spectrum trading and sharing will provide much-needed options for exits to some debt-ridden operators in a sector hurt by intense competition and high prices of 3G and 4G airwaves that operators bought in 2010. Most of the Rs. 2,50,000-crore debt in the industry is due to a few at the bottom of the ladder that have been forced to continue their loss-making operations for lack of an avenue to leave the industry.

Farooqui said that the regulatory clarity brought in by DoT meant that “the worst is over” for the sector. “The sector is in a much more confident and reassured frame of mind,” Farooqui said. “It also sees prospects in data and other growth avenues. It has by and large dealt with a lot of issues that had cropped up,” he added. He dismissed criticism of a contentious clause in the new M&A rules that requires a buyer to pay market-linked price for spectrum that comes with any acquisition, minus the entry fee already paid by the seller, saying operators shouldn’t view M&A as a means of making windfall gains on the airwaves they hold, he said. “Can we create a situation that someone who got it at administrative price makes a profit out of it?” he said. “That’s not the idea. The idea was to make this available and provide him an exit route.” Farooqui added: “He (the company getting acquired) has developed a customer base, a brand and infrastructure, which should be valued and get money for. Spectrum was administratively allocated for purposes of rendering the service. Now that he’s moving out, that spectrum will go to someone else and since our current policy is that it (spectrum) be priced on a market-driven price, therefore it will be.” Operators and analysts had criticised the clause, saying this would increase M&A costs and potentially scuttle a lot of deals. Some analysts said the clause will help in providing a level-playing field for incumbents and new operators. The secretary also indicated that spectrum usage charges to be levied on an M&A deal would likely be at the flat 5% imposed on bandwidth won in auctions, since all airwaves to be transferred to an acquirer will involve market-linked prices being paid to the government.

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